March 8, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Following a string of acquisitions building out their farmland holdings, Canada’s Veripath Farmland Partners announced the launch of an RRSP-eligible (Registered Retirement Savings Plan) farmland investment vehicle to provide access to the farmland investment class to a broader portion of Canadian investors. 

“Based on historical performance data, farmland as an asset class may provide small and medium-sized investors with inflation protection, consistency in returns, and portfolio diversification benefits,” said Stephen Johnston, managing director, Veripath Partners. 

Johnston explained the benefits of such a strategy to GAI News, saying, “The advantage is that an RRSP eligible fund allows Canadian investors to put a farmland holding into their tax deferred federally regulated retirement pension accounts. Contributions to RRSP are only taxed on gains on withdrawal so they provide a material tax benefit.”

“Our new RRSP-eligible, open-ended investment vehicle allows a broad range of Canadian investors to benefit from farmland’s characteristics and do so in their RRSP accounts.”

Launched during the pandemic in mid-2020, Veripath has already amassed a total of 110,000 acres under management on the predilection that global demand for agricultural products, including food, feed, fiber, and fuel, make farmland – particularly Canadian farmland with compelling valuation discounts and an ability to hedge both inflation and stagflation – is a prime long-term investment.

Its approach is put into action through funds that embody two novel features:

The first is an evergreen structure giving investors control over exactly how long they wish to continue being deployed in the fund. This enables long-term investors, such as family offices or pensions and shorter-term investors such as retail, to gain access to farmland that they seek through the same vehicle.

The second feature is a dual fund structure that divides Canada into two distinct geographies of approximately 84 million acres each: its R Fund invests only in Saskatchewan and Manitoba, while its UR Fund invests in the rest of the country, in order to comply with ownership regulations that vary by province. This structure streamlines, simplifies, and opens the Canadian farmland thesis to a broader universe of investors.

RRSP-eligible investments will be limited to this second UR Fund, which excludes farmland in Saskatchewan and Manitoba, but will offer investors maximum flexibility by including opportunities for both short- and medium-term hold periods running between 1-4 years.

It also will avail small-to-medium sized investors exposure to the multiple benefits of investing in Canadian farmland cited by Veripath, including:

Value – Canada is home to some of the most competitively priced farmland among developed nations, especially when viewed on a productivity adjusted pricing basis.

Diversification – Farmland has a low correlation to traditional stock and bond markets, providing an ideal mechanism to improve portfolio risk diversification.

ESG – Zero-till portfolios centered on Western Canada capture material amounts of carbon.

Demand – Farmland is a non-volatile class through which investors can capitalize upon the demands generated by population growth, and the global growing need for food, feed, fuel, and water.

Inflation hedging – Historically, farmland has presented strong hedging capabilities in the face of inflation/stagflation, and has outperformed (in real terms) during periods of low real rates/high inflation.

Indeed, Canadian agricultural production is proving to be a winning proposition for not only investors, but farmers as well, according to a recent forecast by Farm Credit Canada stating that Canadian farm income is expected to reach $98.8 billion this year – an increase of nearly 20 percent over 2021 levels. 

“Veripath was created to provide investors with an inflation-hedging strategy,” said Johnston. “Farmland as an asset class not only performs well compared against traditional investments during inflationary periods, but farm incomes have a strong tendency to keep up with inflation due to the inelastic demand for food.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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